Flight Blog

 

Before reading this blog entry, be sure to read the accompanying entries, Cameroon Monkeys and Leaky Windshields , Misperception #1: Airport Uses City Tax Money, Misperception #2: Airport Sets and Controls Ticket Prices, and Misperception #3: The Airport Can Order Airlines to Fly Wherever We Want!

"The new terminal wasn’t needed and it's a huge waste of tax money!"

This misperception is wielded like a weapon. The accuser stands tall, spinning the ball and chain above their head while saying, “I don’t like the new terminal and you’re wasting my tax dollars!”

Well, first of all, the new terminal wasn’t built with tax money. The total cost of project was $117 million.  $97 million of that total will be paid off with airport revenue—that’s money that the airport generates. The remaining $20 million came from the Federal Aviation Administration (FAA). The money that the FAA distributes comes mainly from fees on airline tickets, aviation fuel and cargo shipments.

As for need….

People who say the terminal wasn’t needed almost always put it in this context: “The new terminal wasn’t needed because the old terminal was never crowded.”

There are several points to make, here’s the first: you don’t build transportation facilities for down times, you build them for peak times. Here’s another way of putting it...

The state highway department is currently spending several million dollars to improve the horribly congested intersection of highways 60 and 65 in Springfield. Suppose it’s four years ago, before construction began, and you’re driving your car through the intersection at 3:00 in the morning. You look around and say to yourself, “Why do they want to spend all that money on this intersection? There’s no traffic out here!"

New terminal critics use the same sort of logic. They went out to the old terminal during a lull and decided a new terminal wasn’t needed.

The old terminal was built in 1964 and was added on to at least five times. Over the years it served well, but by 2005 it had reached its limits—especially in its abilities to handle security, plane parking, and passenger numbers.

Expanding the old terminal was given lots of thought, but a study concluded that it would actually be cheaper to build a new one. Why? The old terminal is landlocked. Major industry sits to the east. Taxiways and runways sit to the west. Expanding to the south and north would have robbed the private aviation community of space and would end up making the terminal longer (from north to south) and less functional.

These are difficult concepts to explain—not because they can’t be understood, but because they are out of sight and unknown to airport customers and the general public.

The old terminal lobby: March 18, 2008
The old terminal lobby: March 18, 2008. That line you see was the line for security screening. It was nearly a 30 minute wait, and reached nearly to the north lobby entrance.
 

 

You had to be out there, behind the scenes, standing on the tarmac, witnessing aircraft operations at six in the morning, to see that the old terminal was not up to the task. You had to stand in the baggage screening rooms, watching security screeners do their vital work in cramped conditions, while the sheer volume of baggage grew from year to year. You had to witness the staggering passenger growth and watch ticket counter lines snake out the front door. You had to see the parked airplanes waiting for a turn to use the loading gates at six in the morning. 

Here’s the bottom line: the old terminal was at the end of it’s life span; it was functionally obsolete. The new terminal will serve us well until the mid 21-century. In the transportation business you have to look to the future and act now. If you don’t, you’re criticized later for doing nothing.

 


 

Before reading this blog entry, be sure to read the accompanying entries, Cameroon Monkeys and Leaky Windshields , Misperception #1: Airport Uses City Tax Money, and Misperception #2: Airport Sets and Controls Ticket Prices.

Based on the email we get, a significant minority believe that an airport can order service from the airlines a la carte. If that doesn’t work, the thinking goes, we demand the service and the airlines comply.

Here’s how it really works…

An airline is a private business. Private businesses do what they want. We can plead. We can tell them that this is a wonderful place to live and work and that we deserve their service. We can offer them breaks on landing fees and money for advertising. We can fall on our knees and beg. But in the final analysis there’s only one thing that matters: does the airline think it can sell enough seats in the market, at the price that it wants, to make the service worth its while?

There are other airline considerations. Does the city wanting the service fit well into the airline’s network? “Network” refers to the different routes the airline flies and how those routes connect to one another via the airline's hub airports. What sort of revenue quality does the city offer? Here’s a simple example of revenue quality: can the airline fill every seat in a 50-seat airplane and charge $100 a seat…or can it fill the same airplane to 60 percent capacity and charge $250 a seat? The plane that’s 60 percent full has better revenue quality. Airline math gets even more complicated…

Here are some other airline revenue measurements:

  • Revenue passenger miles
  • Available seat miles
  • Average stage length

Airlines also want to know about the area:

  • What’s the per capita income in the metro area? The ten county region?
  • What’s the effective buying income of the metro area? The region?
  • How fast is the area population growing? The region?
  • What are the major sectors of the local economy?

I imagine there are quite a few questions on this subject—ask away!

 


 

Before reading this blog entry, be sure to read the accompanying entries, " Cameroon Monkeys and Leaky Windshields ." and "Misperception #1: "Airport Uses City Tax Money."

The airport controls and sets ticket prices! When we face this charge it's usually within the context of a comment like, 'ticket prices are "outrageous" and it's the airport's fault!'

We tell people ticket prices are set by the airlines, not the airport. They come back with, "Whoever is in charge of this should be fired. Don't tell me it is the airlines fault. They have to raise prices because your airport charges so much for fuel and space for them to park the planes.

Wake up!"

That's a real quote. Here's how it really works...

Airlines set ticket prices, not airports. And this airport doesn't sell fuel to the commercial airlines. Each airline has its own contract with the oil company.

As for fees we charge airlines, landing fees are currently $1.18 per 1,000 pounds. Exclusive use space (offices, ticket counters) has an annual rent of $40.69 per square foot. Joint use space (ramp, gates, tug areas, runways, etc.) is figured out using a formula based on an airline's market share. When you add up these costs, and figure the averages, here's what you come up with: the Springfield airport charges airlines $4.77 for each passenger that gets on a plane. In the jargon of the industry, this is called, "cost per enplanement."

Enplanement costs vary. In places like San Francisco and Pittsburgh, it's over $13. Moody's Investors Services says the median airport enplanement cost in the United States is $6.25. So here's the takeaway-our airport charges are below the median-so low that the Federal Aviation Administration (FAA) had told us that we ought to raise them. The rates do go up at a pre-programmed rate of three percent a year (covering the average rate of inflation), but we have respectfully told the FAA that we have no intention of making large rate adjustments. We strongly feel that low rates are one of the reasons why we have such good air service for a small market.

All of this leads to the obvious question: if the airport doesn't control ticket prices, and if it isn't charging the airlines outlandish rates, why are prices higher here? (I challenge the basic premise of that question, but more on that it a minute...)

Some don't like the answer, but here it is: we're a small market airport. Ticket prices tend to be higher in small markets and cheaper in larger markets. Remember the economics law of supply and demand? The larger the supply of seats, the cheaper the price; the smaller the supply of seats, the higher the price. Airports like Tulsa, Kansas City, St. Louis have a larger supply of seats than we do. There are other economic factors at work, such as lack of competition, but supply and demand is a large part of the equation.

As for the basic premise of the question...

Those who think it always cost more to fly from Springfield are living in the past. It was true 10-15 years ago, but these days it frequently cost less, or the same, when compared to Tulsa, St. Louis or Kansas City. I recently heard from a would-be-customer who talked about having to drive to Tulsa to fly to Las Vegas. He had compared the cost of American Airlines from Springfield to Las Vegas, to the cost of Southwest Airlines from Tulsa to Las Vegas.

Our conversation went something like this... "Have you heard of Allegiant Air?" I asked. "No, and don't try to change the subject..." He started ranting. I continued. "I'm going to the Allegiant web site right now. Let's see, here's a $39 one-way fare from Springfield to Las Vegas. And if you return on Wednesday that's a one-way fare of $79. That's a total base fare of $118." There was silence on the other end for what seemed an eternity. Finally, "oh."

The persistent misinformation about airport charges and fares has been frustratingly difficult to stamp out thanks in part to the local media's willingness to parrot it, and in some cases, lie about it. Case in point...

A couple of years ago Journal Broadcast Group allowed an employee to get on the air and deliver this lie: "There are several airlines that are already very upset-several might be over stating it-but more than one-and are considering pulling out of Springfield, because of this new terminal...jets will have to taxi further to get to it and will spend at least $100 per flight in extra fuel because they'll have to taxi further."

The line had been crossed from misinformation to disinformation—it was pure fiction, and, we had hoped, a tale that had run its course. Then last Monday, déjà vu. The Springfield News-Leader resurrected the disinformation, and lent it credence, through its nameless web page critics:

"It was estimated before the terminal was built that the new terminal location would add approx. $100 in fuel cost to each flight vs. the old terminal."

It's a sad commentary on the state of American media when rumor, innuendo and lies are presented as "fact." We live in an age where "information" is abundant, but knowledge is in short supply.

If you hear a whopper about the airport, please set the record straight. Disinformation is destructive-not only to the airport-but to Democracy in general.

Climbing off the soapbox now...

 


 

Before reading this post, you might want to read this previous posting, Cameroon Monkeys & Leaky Windshields, Redux. Today we’re tackling the number one misperception about the airport: the airport receives tax dollars from the City of Springfield. Recently, two more questions have come along:

  1. How can the airport spend money on projects (like the new terminal) while the city of Springfield has a budget shortfall?
  2. Why doesn’t the airport give the city money to help with the city budget?

The answer to these two questions can be summed up in two words: revenue diversion. To explain what this means, let’s start with where our airport’s funding comes from. There are two basic sources:

  • The federal government. The feds send us money through the Federal Aviation Administration (FAA). FAA money comes mainly from fees on airline tickets, aviation fuel and cargo shipments..
  • The rest of the funding comes from revenue that the airport generates. This includes income from fees and rents charged to airlines, restaurants, rental car companies, gift shops, etc. To put in simply: any business that does business at the airport must pay the airport for the privilege of doing so.

That’s it. Our airport doesn’t get a cent of money from the city or state. With the exception of the federal funds, the airport supports itself. In fact, the airport pays the city for the following support services: finance, human resources, legal and purchasing. The cost of these city services is negotiated and must be approved by the FAA. Let’s move on and talk about the strings that are attached to FAA money.

When the airport gets money from the FAA, it agrees to follow FAA spending rules. One rule towers above the rest: all airport generated revenue should be spent at the airport. To spend airport generated money elsewhere, without explicit approval of the FAA, is “revenue diversion.” Under federal law, revenue diversion is illegal. If airport money is diverted, the FAA can withhold all federal funding. That can cause financial havoc. For example: the debt service for our airport’s new terminal is based, in part, on anticipated federal money. If that anticipated money suddenly goes away, the airport could, in a worst case scenario, default on the terminal loan.

( A brief side note: there are a few airports in the country that are essentially exempt from revenue diversion rules. They were grandfathered in years ago when revenue diversion rules were put in place. The closest one we are aware of is Lambert Field in St. Louis. Every year the the City of St. Louis is allowed to take some of the airport's revenue. )

So what’s up with this “revenue diversion” idea? Why does the FAA care? The Florida Department of Transportation explains it this way—by the way, “grant,” is one of the bureaucratic terms for “money:”

The intent of federal/state aviation funding is to ensure that the national network of airports is well-functioning, efficient and financially viable. Since the federal and state governments are capable of providing only a fraction of airports’ development needs, airports need to spend all the revenues they generate for the operations and development of the airport to ensure adequate infrastructure investment. The ultimate goal of any airport development grant is to make the airports as self-sustaining as possible and minimize the need for further federal/state assistance. The diversion of airport revenue for non-aviation use limits the effectiveness of grant assistance and jeopardizes the goal of achieving self-sustainability. The main rationale for the revenue retention provision is the intent of government to ensure an effective, efficient and safe aviation system. The state and federal contributions to this goal can only be maximized when local aviation-related funds are solely used to achieve the same purpose.

Let’s put all this in the perspective of the current economy and the declining revenues faced by many cities.  In 2008, a legal digest, written by the Airport Cooperative Research Program (ACRP), said this about airport revenue diversion:

The fiscal problems facing municipal governments more generally (including infrastructure needs and such operating costs as fire and police protection), coupled with a declining tax base, have forced many to search for new sources of revenue. Congress has stepped in and enacted laws to circumscribe the ability of federally funded airports to support local governments generally. Unlawful revenue diversion is the use of airport revenue for other than airport purposes.

The digest continues:

It is understandable that financially strapped local governments look to airports as “cash cows.” Indirect taxes can be levied upon airlines and passengers who may have no vote in the local jurisdiction; hence there will be no political price for the local politician to pay for imposing unjust fees upon them for services they do not receive. Indeed, the local politician can be viewed as a hero among his constituents, who enjoy enhanced governmental services with no corresponding local financial burden.

Note this point in the above paragraph: “Indirect taxes can be levied upon airlines and passengers…"

Here’s what the ACRP legal digest says on this point:

Airlines and aircraft operators, as well as airport concessionaires, have objected to diversion on grounds that if airport revenue is spent on non-aviation uses, they will be forced to shoulder the economic burden thereby created. Airports account for between 4 percent and 6 percent of airline industry costs, and a diversion of revenue could, according to the airlines, only worsen the airlines’ financial condition, which, since deregulation, has fallen to historic lows… The airlines are concerned that spending airport revenue on non-airport services results in increased rents, fees, and charges to airlines exceeding the cost of airport capital and operating expenses.

In other words, airlines don’t like revenue diversion. If a city diverts airport revenue, it could end-up forcing some airlines to leave town.

If all this makes your head hurt, well, it’s understandable. Please bear with us for one more point.

When a city owned airport accepts money from the FAA, it’s actually the city that’s accepting the money. In the jargon of the business, the city is the airport “sponsor.” When the money is accepted, there is a “binding obligation between the airport sponsor and the federal government.” That’s according to the ACRP legal digest. If a sponsor diverts money from its airport, the feds can, and will, drop the hammer. Here’s how the Florida Department of Transportation explains it:wingsdollars

Federal transportation officials can also withhold general transportation funds from any local government that diverts revenue generated by a public airport. Under 49 USC §47107, the U.S. Secretary of Transportation “may withhold any amount from funds that would otherwise be made available to the sponsor, including funds that would otherwise be made available to a State, municipality or political subdivision thereof (including any multimodal transportation agency or transit authority of which the sponsor is a member entity) as part of an apportionment or grant if the sponsor fails to reimburse the airport for unlawfully diverted revenue.” This means that the U.S. Secretary of Transportation has the authority to withhold not only aviation, but also transit and rail funds from local governments that fail to reimburse airports for illegally diverted funds.

There you have it. Now you know why the airport can spend money on its own projects while the city of Springfield has a budget shortfall, and why the airport can’t give the city money to help with the city budget.

Read about the most infamous case of revenue diversion by clicking here. Here's a link to another well known case.

 


 

About three years ago this blog ran a series of postings about the biggest misperceptions people have about the airport. It’s time to dust those postings off, tweak, and repost. 

Why? Because the Misinformation Monsters have been out in full force the past week — particularly the nameless critics that the Springfield News-Leader feeds and nurtures at the bottom of its web pages. 

British novelist Samuel Richardson said something that sums up many airport critics, and we're paraphrasing here,  ‘People with bad information, and therefore little understanding, are most apt to be angry.’
 

 

We get all sorts of questions and comments from the public. Here’s a sampling:

  • I am having a monkey flown in from Cameroon, what is expected of me?
  • Our flight was canceled because the gasket around the windshield of the plane leaked. Why wasn’t this fixed the night before?
  • There was no signage telling us where to turn off for the airport from highway 65…
  • We want to import dogs from Lebanon (the country) to USA through your airport. Please inform us of the requirements to allow the dogs, coming from Lebanon, to enter to USA.
  • I am interested in studying to become a flight attendant. Please send any information to my home or email address.
  • Does the Springfield Airport fly into Lafayette, Indiana? (To this question you can add the following cities: Little Rock; Flagstaff; Hartford; Centralia, Illinois; Muncie; and Eau Claire, Wisconsin. Then there’s the more obvious wish list: Kansas City, Houston, New York City, and Washington D.C.)
  • I wanted to know if you have a heated/cooled cargo hold?

Don’t get me wrong—I’m not making fun. At first blush some of these questions do seem silly, but they all have a common need: customer service. They want and need good information. That’s what people yearn for. When they can’t get it from the airlines, they end up asking the airport. And in many people’s minds there is no distinction between the airport, the airlines, the highway department and the U.S. Department of Agriculture. We’re all just one big ball of wax.

We can deal with it most of the time, but it does get frustrating--especially so with those who don't have a need, they're just mad.

Take the lady who took pleasure in berating the airport because the airlines don’t keep flight information up-to-date. Her email cackled, “One more black eye for the Springfield Branson Airport!” Ouch--didn’t even know we had ONE!

Then there was the nameless News-Leader expert who declared the airport is losing commercial air service. He knew this because his, “Office in on the flight path and we see every aircraft that lands & takes off. 75% of the time, we see military cargo aircraft shooting take offs & landings, NOT commercial carriers."

Ouch--who needs facts? Never mind that our airport was the only airport in the region last year to have positive passenger growth--up four percent. But here’s the real kicker--airplanes landing and taking off in Springfield can do so from four different directions. That means the critic’s office is located in only one of four flight paths…

In the next few days I’ll be blogging about the biggest and most common airport misperceptions:

  1. The airport receives tax dollars from the City of Springfield.
  2. The airport controls and sets ticket prices.
  3. The airport has only to snap its fingers and the airlines will appear and fly wherever we want (get out that wish list)!
  4. The new terminal wasn’t needed, is a huge waste of tax money.
  5. The airport is too small to land “big” airplanes.

This is not an exercise meant to berate or insult. It’s meant to inform. Remember what Sam Richardson said.